CBI NI Statement on the Results of the I-SEM Capacity Auction

CBI Northern Ireland have issued a statement on the results of the recent I-SEM capacity auction.

The results of the first Integrated-Single Electricity Market (I-SEM) Capacity Auction for the period May 2018 – September 2019 is promising for consumer prices, however there are still a couple of issues that the business community will be seeking assurances on.

The CBI supports the auction’s potential to save consumers (both domestic and industrial) approximately £50 million per annum – providing a welcome boost to Northern Ireland’s economic competitiveness. However, while lower costs represent a positive step, there are unfortunately some concerns around the potential closure of generation units at Kilroot and Ballylumford in May 2018.

CBI represents many large companies that base their investment and production plans on a secure supply of electricity. Therefore from a business perspective CBI NI will be seeking assurances from the Utility Regulator that, in the event of generation unit closures, Northern Ireland will retain sufficient generation capacity to meet the region’s needs between September 2019 and 2020/21 - when the second North/South Interconnector is scheduled to be completed. In addition, large energy users will be interested to explore how the latest auction will impact upon wholesale energy costs should Kilroot now close earlier than expected.

Finally, the CBI recognises that the Utility Regulator has a very difficult job managing the delicate balance between electricity demand, security of supply, sustainability and customer price. While the move to I-SEM auctions is widely recognised as a more efficient mechanism to achieve efficient and competitive markets, this approach in its infancy could raise problems about inefficient signals for market exit and entrance to long-term investors – particularly when the auctions are not carried out on a multiple-year basis. Given the huge amount of capital, investment and human resources wrapped up in a company’s decision to invest in any energy market, a one year approach to auctions may create unforeseen problems and force companies to leave the market.

Clarity is needed on how the regulator intends to drive down consumer costs whilst at the same time providing a stable electricity market that remains attractive to potential investors.

In the coming weeks we will host a meeting of the CBI NI Energy Strategy Forum to discuss the results of the Capacity Auction. If you are interested in attending, then please contact Iain Hoy at iain.hoy@cbi.org.uk.